On May 11, 2022, New York Governor Kathy Hochul announced the creation of the Department of Financial Services’ Office of Drug Benefits. Governor Hochul noted that the Pharmacy Benefits Bureau is the first of its kind in the country. The Office of Pharmacy Benefits will be responsible for implementing and overseeing new licensing and reporting requirements impacting Pharmacy Benefit Managers (PBMs) in New York City. Mintz previously blogged at S7837/A8388, which Governor Hochul signed into law on February 24, 2022. This law amended Section 29 of the New York Insurance and Section 280-a of the Public Health Act and authorized the Department of Financial Services (DFS) regulate PBMs operating in New York.
As noted in our previous blog post, S7837/A8388 defines a “pharmacy benefits manager” as any entity that provides “pharmacy benefits management services” for a “health plan”. The term “drug benefit management services” is defined to include the direct or indirect management or administration of drug benefits for a health plan, whether the PBM and the health plan are associated with each other or linked. The term “drug benefit management services” also includes the purchase of prescription drugs to be dispensed to patients, or the administration or management of prescription drug benefits, including, but not limited to:
- Postal Service Pharmacy;
- Claims processing, management of the retail network or payment of claims to pharmacies for the distribution of prescription drugs;
- Development or management of a clinical formulary or other formulary or list of preferred medications;
- Negotiating or administering discounts, rebates, payment differentials or other incentives, for the inclusion of particular prescription drugs in a particular category or to promote the purchase of particular prescription drugs;
- Patient compliance, therapeutic intervention or generic substitution programs;
- disease management;
- Drug use review or prior authorization;
- Adjudication of appeals or grievances related to prescription drug coverage;
- Contractualization with the pharmacies of the network; and
- Control the cost of covered prescription drugs.
Office of Pharmacy Benefits
The Department of Financial Services’ Office of Pharmacy Benefits will oversee the PBM industry in New York, which was previously only partially regulated by network formation requirements. Governor Hochul noted that the goal of the Pharmacy Benefits Bureau is to increase transparency on how PBMs negotiate drug prices. Through the Pharmacy Benefits Bureau, New York hopes to reduce drug and health insurance costs for New York residents. In addition to licensure and general oversight of PBMs, the Pharmacy Benefits Bureau will assume the existing authority of the Department of Financial Services to investigate drug price spikes.
Registration and annual report deadlines
The Department of Financial Services issued new guidance on May 5, 2022, clarifying the requirements outlined in S7837/A8388 and outlining new registration and annual reporting deadlines with which PBMs must comply.
PBMs must first register with the Department of Financial Services by June 1, 2022. To register, PBMs must file electronically through the DFS portal. As of the date of this blog post, the DFS Portal does not appear to be live. The Ministry notes that the DFS portal will be online before the deadline. PBMs can send emails [email protected] to request an email notification when the system becomes operational.
All PBMs operating in New York must file their first annual report with the Department of Financial Services by July 1, 2022. Importantly, in order to submit the annual report, the PBM must first register with the Department of Financial Services financial. The primary contact person listed in the PBM registration application will receive a link shortly after submitting the registration application to the Department of Financial Services to file the annual report. All PBMs are required to submit both the Annual Report Form and the Annual Report Worksheet by the deadline.
We will continue to monitor New York’s regulations on PBMs and determine whether New York’s regulations encourage other states to establish agencies similar to the New York Pharmacy Benefits Bureau.